A bipartisan House bill that would allow Blue Cross Blue Shield North Carolina to reorganize and create a holding company that could transfer billions in surplus policyholder money is on its way to the House Rules Committee after passing in the House Insurance Committee Wednesday.
H.B. 346, which passed the House Health Committee Tuesday, is opposed by N.C. Insurance Commissioner Mike Causey, who held a press conference Monday to discuss his opposition. He said it lacked transparency and that healthcare premiums would likely rise if the bill passed.
Causey said at the press conference that in the bill, also known as the Reorganization & Economic Development Act, BCBSNC would transfer the entire ownership interest in the hospital service corporation to the holding company and would lack the same regulation as it has now. However, BCBSNC spokeswoman Sara Lang disagreed with that characterization in an emailed statement to Carolina Journal Wednesday.
“Under the legislation, there would be no transfer or change in control,” she said. “There would be the same board/same leadership, and the holding company would be subject to DOI oversight. In fact, additional regulations have been put in place that will be applicable to this Holding Company. As a result of the Commissioner’s and Attorney General staff’s feedback, the PCS (proposed committee substitute) gives the Commissioner the authority to enforce requirements that Blue Cross NC and the non-profit holding company remain focused on the healthcare of the people of North Carolina.”
Causey continued by saying the bill would allow executives to move a portion of $4.6 billion in policyholder reserves to the holding company and would allow BCBSNC to circumvent statutory limits on reserves that would otherwise require money to be returned to policyholders or reduce rates, which will more than likely raise rates for everyone with the company’s insurance.
Rep. John Bradford, R-Mecklenburg, one of the primary co-sponsors of the bill, said at Wednesday’s meeting that the bill is a business regulatory reform bill that gives not only BCBSNC but also Delta Dental, two hospital service corporations (HSC), a level playing field so they can compete in the very rapidly changing and competive healthcare industry.
He also said the proposed committee substitutes (PCS) at yesterday’s meeting and an amendment to the bill passed at Wednesday’s meeting addressed transparency concerns that various stakeholders had.
In addition, Bradford countered those, including Causey, who oppose the bill as having “an ideological difference about how much regulatory control our regulators should have versus a business corporation structure to give a company a level playing field” and help serve their mission.
“None of the for-profit insurance companies will show up to those (rural) counties,” he said. “They’re a mission-driven organization, and they’ve been characterized as having corporate greed. I think that is unfair in a big way and a mischaracterization at the highest level.”
Bradford said the bill simply gives them flexibility and autonomy while still having oversight.
On Monday, Causey said he was concerned that allowing investments in out-of-state companies with no regulation would seriously impact policyholders and possibly raise rates when stating the bill has no limits on how the holding company invests policyholder money to ensure it benefits North Carolina policyholders.
“Many of the things we’re trying to do in this bill you’ve heard, oh, we’re just gonna let them invest out-of-state,” Bradford stated. “Well folks, they can already invest out-of-state, and they already do invest out-of-state.”
He also disputed figures that Causey referenced in his press conference that stated BCBSNC’s market share in 2021 was nearly 83%. He said they actually have a 55% market share and 10% market share in Medicare Advantage.
“I just want to make sure we’re not dealing with fiction and that we’re dealing with facts,” he said.
Bradford reiterated that the bill is about economic development and compared the company with Blue Cross Blue Shield Tennessee. While BCBSNC has 5,000 employees, BCBST has 6,400 employees and is also non-profit, but they have investment freedoms to compete while BCBSNC doesn’t.
Rep. Destin Hall, R-Caldwell, asked if there are safeguards in the bill that will allow Causey to enforce the bill’s requirements and allow the company to keep its non-profit status. Bradford replied, yes.
Committee chair, Rep. Chris Humphreys, R-Lenoir, said he disagreed with Causey that the bill would make insurance rates rise and that rural Lenoir County has no other choices regarding health insurance.
“Blue Cross has a mission to serve rural North Carolina, and this bill will help,” he said. “It is crucial to rural North Carolina.”
Bradford again addressed a question about the bill possibly causing healthcare premiums to rise by reading a portion of a letter from the chairman of the board of BCBSNC.
“There is nothing in this bill that would increase premiums,” Bradford read from the letter. “Opponents have not provided any concrete examples or reasons this would lead to higher premiums. In fact, the commissioner holds the authority to approve or deny premiums. He owes the public a more thorough explanation of how this change would force him to approve higher premiums.”
Rep. Donny Lambeth, R-Forsyth, said he agreed with Humphreys that healthcare premiums wouldn’t go up, but he thinks they may actually go down due to the bill. He did acknowledge the concerns about “not knowing everything that is coming down the pike at some point.”
But not everyone was on board with the bill.
Rep. George Cleveland, R-Onslow, was skeptical of the bill’s timing.
“How long you have you been working on this?” he asked Bradford. “The timing seems very odd to me.”
Bradford said the bill was filed on March 9, but things are moving quickly because of the bill crossover deadline of May 4.
“You know, Blue Cross Blue Shield was happy with their arrangements a year or so ago in the state, and they lost one of their contracts (State Health Plan), and all of a sudden, they want to become the Golden Boy to take care of everybody in the state,” Cleveland said. “I personally am not going to vote for this bill. I don’t think the motive behind it is genuine, and not being an insurance guru, I believe that this is something we shouldn’t be doing at this time.”
Bradford assured Cleveland that his reason for supporting the bill was totally unrelated to BCBSNC losing the SHP contract to Aetna.
“This is a business regulatory reform bill,” Bradford said. “I believe in equality for businesses to compete, and that’s what we’re trying to do, and I do not think it’s time to turn our backs on Blue Cross Blue Shield and Delta Dental.”